New Year, New Business
This is the year to put your New Business Idea into action!
So, you’ve got an idea for a new business? Consider the following important points before you start building.
It’s the New Year, and even though the December holidays now seem like a distant memory, the “time off” ought to have helped you take account of the rollercoaster that was 2020, evaluated your life and reset your priorities for what’s to come this year. Most people end this process with a list of resolutions, many of which have to do with relationships, or (for the most of us) a fresh set of fitness goals that we hope to achieve. For many other people though, they resolve to finally “start that new business” or take their first step into entrepreneurship. And what an exciting place to be!
For obvious reasons, more people think about starting a new business around the new year than any other time. So, if you’ve been thinking about your “winning” idea for a while and feel the time is now, then you’re not alone. Why not use the “time off” to truly evaluate if your idea could work, and the requirements to do so? Below we highlight a few key considerations when deciding if/how to turn your idea from concept to reality.
Firstly – a good way to validate the potential of a business is to research whether there is a market (or demand) for your idea, and to understand the requirements to create a business around it. This process takes time – but is absolutely necessary to understand the scope of what you’re getting into. Definte your product or service in detail. What are the nuances of the industry you intend to operate in? Who is the target customer? What makes your idea unique? Write down these answers as a foundation to your planning. Then, ask yourself the following questions:
- Does your idea solve a real problem? A “real problem” is one that is faced by many people, often. Real problems leave people frustrated because of cost, need, inconvenience, difficulty or lack of options and will encourage a demand for your solution. Better still, real problems are the ones that customers are willing to pay to have solved.
- How unique is your idea? In highly competitive industries, it is important that your business is differentiated from competitors. Creating something unique makes your business “defensible” in the instance that a competitor decides to copy your idea or business model.
- How big is the market for your idea? Think about how many people are likely to become paying customers. For reference, look at existing businesses and see how many customers they are serving. Who are they and where are they? Be realistic here – no new business can serve everybody, anywhere, at any time.
- Would your customers be willing to pay for your solution, and how much? Depending on the profile of your target customer, you can use various methods to set a competitive price for your offering. Then, based on your knowledge of (or asking) potential customers, it’s important to establish whether they’d be able and willing to pay your price.
- How will you distribute your product/service? It’s as important to understand how you’ll distribute your product, as it is to create it. Once you’ve built your product/service, you need to get it into the hands of customers. Consider how much it will cost to generate a sale through marketing, fulfilment or a sales team.
- What does your idea require to build? Do you have the money, skills and time? Consider this in light of building the simplest version possible and what the initial/ongoing costs are in operating the business. Now, it’s clear that “cost” is the biggest prohibitor to people taking the leap into starting a business. And whilst this is a real concern for people who lack start-up capital, we recommend researching the several hundred funding options now available to entrepreneurs in SA before you “write yourself off. (Hint: at getlion we’re building a first-of-its-kind funding portal to help our users apply for funding effectively)
These considerations are a good starting point, but one of the greatest challenges in evaluating a new idea is the narrow focus of the entrepreneur behind it. We all struggle to look at our ideas objectively and identify their flaws. No one ever started a business thinking that their idea was average, yet over 50% of new businesses don’t make it passed their second year. This means that it’s important to get as much insight/feedback about the business as possible, before you invest any money or time. Invite feedback from a partner, mentor or friend (who can tell you the hard truth) and invest time to truly understand your potential market. In any event, this research will form the basis of your business plan.
PS: We built a tool on the getlion mobile app to help our users “score” their business ideas before getting going – in the hope that they’ll be better prepared to turn those ideas into a reality. You can download the getlion mobile app for free on Apple or Android for more.
And finally, it’s important to realise that building a great business requires far more than a good idea. A good idea without the correct execution, distribution, systems and people won’t generate the necessary sales to survive (and thrive) – so it’s worth little more than the paper it’s written on. This reality shouldn’t discourage you. Rather, it should motivate you to build a business that will last. After all, every great business started the same way that you are, right now. The most important thing is to START – you’ll learn more that way than any other. Start by reading our Guide on How to start a Business in South Africa.